City of Toronto Auditor General Beverly Romeo-Beehler has uncovered rampant examples of potential bid rigging in tenders for city infrastructure contracts over a five-year period, with an audit citing seven specific cases involving contractors that raise “red flags.”
Each of the seven red flags indicating different types of potential collusion on bids was accompanied by an example identified during a study of public contracts awarded between 2010 and 2015 by the Transportation Services Division of the City. An average of $100 million in road repair and maintenance contracts per year was awarded during that period.
One example illustrating market domination, that indicated possible bid rigging, was a pattern of bids in which two contractors together won 71 per cent of all local road-resurfacing contracts issued between 2010 and June 2015. "In District 1, Contractor A's odds of winning were nearly 92 per cent, winning 11 out of 12 bids it submitted," noted the report.
As an example of bid suppression, in Toronto's District 4 there were only five unique bidders for all tenders over five years, with an average of four bidders per tender. By comparison, District 2 had 16 unique bidders and on average six bidders per tender.
A City of Toronto spokesperson indicated "police and other appropriate authorities" have been asked to investigate the alleged irregularities. Collusion on bids is prohibited by the federal Competition Act.
Romeo-Beehler has recommended six new procurement practices to the city's audit committee, which was scheduled to meet March 24.
Reached for comment, Ontario General Contractors Association director of government relations David Frame said there is a lot more to the city's procurement problems than has been revealed and said the OGCA is considering its next moves before discussing matters further.
"We have significant issues with how the City of Toronto does its procurement. We do not believe they are getting good value for money and we believe that lax systems are not good for the city or the contractors," said Frame.
Ontario Road Builders' Association (ORBA) chief operating officer Geoff Wilkinson said ORBA was informed by the auditor general's office of her report on March 21 and that ORBA "takes these things very seriously."
"Two things, one is that we are in support of City of Toronto putting in place policies and ensuring that they have policies that are communicated to their staff," said Wilkinson.
"For ORBA, our role is to ensure we have open and equitable practices and that there's a clear playing field for all our contractors right across Ontario.
"The other thing that is really important is that we are all bound by a code of ethics and that includes some of these types of things as well as other ethical types of behaviour."
Other construction sector stakeholders said they wanted to study the issues further or they had no comment.
Toronto Mayor John Tory issued a statement saying he is "extremely troubled" by the report but is "confident the city is making changes to address all the issues identified."
City of Toronto manager of media relations and issues management Wynna Brown commented in an email, "We would like to emphasize that the city has undertaken a comprehensive action plan in response to the AG's review and implementation is well underway to ensure fair and competitive procurement processes are in place to enable the city to obtain best value for money and fair market prices."
The six recommendations include calls for development of a database with all tender, contract, and sub-contracting information for all construction contracts; increased staff training to recognize bid rigging and implement preventative controls; and adoption of "a practice of keeping the identity of prospective bidders who purchased the bid documents confidential."
Wilkinson commented, "I haven't had time to delve into those yet. I have read them over but in terms of what they may mean, from first glance I haven't seen anything that jumps out at me.
Once we are able to go through those in a little more detail we'll be able to respond better to that question."
The auditor general said $2 million a year could be saved by addressing unbalanced bidding.